The five ways for SME to use data to challenge supermarket dominance
Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles here.
To compete in a retail environment savviness in the usage of data is a critical element for supermarket businesses. These days, any retailing beyond the archetypical lemonade stand by the side of the road is data intensive, but particularly supermarket retailing is heavily data intensive. Commonly a supermarket range is up to 30,000 Sku’s across a number of different formats and geographic and demographic locations, and many hundreds if not thousands of suppliers, all with their own focus and story to tell.
The physical space of a supermarket needs to be allocated across the Sku’s chosen to be on range in the way that best delivers a return on their investment in the particular store and strategically across the chain.
SME suppliers to chain supermarkets usually are playing from a position of weakness, as they lack the scale to have the data and category management resources that supermarkets demand. However, the strength of an SME is that they can be far more agile and market-sensitive than bigger rivals, often SME’s can develop and launch a product before a multinational can get the first development workshop together.
Whilst supermarkets have a wealth of data at their fingertips, both their own and that supplied by their large suppliers, they recognise that not every piece of data is worth the digits it is written with. Data is only of any value if it leads to some sort of actionable insight, and it is here that SME’s have an advantage despite the disadvantage of smaller size. Making the connections between differing seemingly disconnected data points is where the gold is hidden.
There are several points at which data can be collected, from which insights can be gained. Internal, observed and purchased.
- Sales and margin history. No SME should be without a robust and detailed sales and margin analysis of their own sales history, and thus ability to forecast with some certainty. Every SME has a sales history in their accounting package, but too few recognise how to use it. Most use the “Office” package, which includes Excel, but many do not use the power of the tools in Excel. Pivot tables are the most underutilised and useful tool available for an SME. If you are one of the majority who do not use them, wake up, spend 30 minutes on YouTube figuring out the basics, and start generating insights. Also in Excel is the V-Lookup tool, which can be enormously valuable to SME’s to keep accurate track of a whole range of variables in their business.
- Sales intelligence. SME’s are usually in a position to have unfiltered market intelligence in the hands of decision-makers easily and quickly. Usually the people best positioned to see change as it is evolving are those in direct contact with customers and consumers, often the lower paid front line staff, get too often ignored in larger businesses, but are vital in smaller ones. Being engaged with these staff, or indeed as is the case for many, being part of that team is a part of the role of the SME business owner or executive. It puts you in a position to see shifts as they occur, and react very quickly. Finding a way to turn these random conversations and insights into data points that can be connected and acted on can build into a significant competitive advantage. There is no substitute for the insights gained by simply watching and understanding the drivers of consumer behaviour, then crafting an offer that adds value for customers.
- Agile operations. Scale brings its own momentum, despite the huge improvements over the last 20 years by the adoption of Lean practices. Large suppliers to supermarkets, with large factories, fixed planning cycles and extended supply chains are often caught short by the unexpected and unplanned. Agile suppliers can often fill the gaps created, but to do so they need to be able to make very quick decision on costs, time frames, and operational priorities and limitations. To make these decisions, they need absolute understanding of their cash and financial position, costs and decision drivers like break even points, the impact of discounts, and negotiation trade-offs they can make. To be truly agile, you need accurate and detailed financial and operational data that is easily useable to make well informed decisions, then track the outcomes of those decisions.
- Be experimental. Having good data enables experimentation on a scale that offers great insights, but minimises risk. The supermarkets are increasingly amenable to enabling SME’s to experiment with all sorts of offerings as they learn as well from the activity. However, you cannot just walk in and expect to be taken seriously without a history of sensible innovation and a relationship with the individual decision-makers in the retailer. Having robust, realistic and well understood strategic and operational planning in place is a must if you wish to be experimental and stay in business.
- Purchase syndicated data. Scan data can be purchased in many forms, and to varying degrees of analysis and detail. There is a significant cost to this information, firstly the purchase costs, but more importantly, the cost of data analysis capabilities. Increasingly scan data is being matched to the behavioural data emerging from store loyalty cards to add another dimension to decision making, and this trend will only accelerate. SME’e can dip in and out of this data, taking a slice here and there to provide insights without the significant investment of being fully engaged. Treated sensibly, it can be used a bit like market research, taking a small and well defined sample and using it as representative of the whole picture.
None of this is easy, which is OK, because if it was, everyone would be doing it. However, many SME’s simply think it is all too hard, and stay away, effectively walking away from 75% of the volume in the market. For many, this is a sensible decision, but for some, those SME’s with a genuine opportunity to become larger businesses, building solid capabilities in collecting and leveraging data is essential.
Allen Roberts is a guest contributor to Australian Food News and writes another of his regular articles here. He is the Director of Strategy Audit www.strategyaudit.com.au and has worked in the food sector for more than 35 years. To read his full biography click HERE.